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Update: Asian shares mixed, Shanghai bounces back after slump

Asian markets were mixed on Wednesday, with fresh fears about Greece and further losses in oil prices offset by a strong rebound in Shanghai, a day after suffering its worst loss in five years.

[HONG KONG] Asian markets were mixed on Wednesday, with fresh fears about Greece and further losses in oil prices offset by a strong rebound in Shanghai, a day after suffering its worst loss in five years.

The yen made further inroads against the dollar as last week's positive sentiment gave way to caution.

Tokyo - taking another hit from the strengthening yen - sank 2.25 per cent, or 400.80 points, to 17,412.58.

Sydney fell 0.45 per cent, or 23.7 points, to 5,259.0 and Seoul slipped 1.29 per cent, or 25.39 points, to 1,945.56.

Shanghai - which plunged more than five per cent on Tuesday - surged 2.93 per cent, or 83.74 points, to end at 2,940.01, while Hong Kong was up 0.52 per cent in late trade.

Tuesday's heavy losses in Asia, which followed a week-long rally, spread to European and US markets and were exacerbated by news that Greece had brought forward a presidential election, raising fears of fresh political instability.

Members of parliament agreed to hold a poll to replace President Karolos Papoulias on December 17 instead of February, when it was due.

The election is a key test for Prime Minister Antonis Samaras, who will be forced to call snap general elections if his candidate fails to garner enough support.

Samaras said he brought it forward to clear "clouds of political instability in Greece and political uncertainty over Greece abroad".

Analysts warned the uncertainty could stall Greece's fiscal reforms that are required as part of its bailout deal with the European Union and International Monetary Fund.

Greek stocks plunged 12.8 per cent - the largest one-day drop in 27 years - as investors feared a return to the dark days of the eurozone debt crisis that saw Athens almost leave the currency bloc.

The euro fell to 147.50 yen in Tokyo Wednesday from 148.01 yen while fetching US$1.2387 against US$1.2378.

The unease spooked dealers across the Atlantic, although initial sharp losses were pared by the end of trade on Tuesday. The Dow fell 0.29 per cent and the S&P 500 dipped 0.02 per cent but the Nasdaq added 0.54 per cent.

In Shanghai the benchmark composite index, which had surged about 20 percent since last month helped by an interest rate cut, rallied towards the close on increasing speculation that Beijing will further ease monetary policy.

The market tumbled in the morning after data showed inflation had fallen to a five-year low of 1.4 per cent in November, fanning fears of deflation.

The dollar was at 119.11 yen Wednesday, down from 119.63 yen in New York Tuesday afternoon and sharply lower than the levels above 121.00 yen at the start of the week.

The yen has recovered as dealers shift into safer assets during times of uncertainty.

However, the dollar's uptrend still remains intact, said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan. "It wouldn't be a surprise" if the dollar rebounds towards the technically important level of 121.30 yen within several days, he told Dow Jones Newswires Oil prices - which have been hammered by a global supply glut - fell on expectations of a build-up in US crude stockpiles, indicating slack demand in the world's top oil consumer during the winter season.

US benchmark West Texas Intermediate for January delivery slipped 86 US cents to US$62.96, while Brent crude was down 81 US cents at US$66.03 in afternoon trade.

Oil rose slightly in New York after the US Department of Energy reduced its 2015 US production forecast marginally.

Gold was at US$1,235.69 an ounce compared with US$1,204.67 late Tuesday.

In other markets: - Taipei fell 1.06 per cent, or 96.74 points, to 9,032.16.

Taiwan Semiconductor Manufacturing Co slipped 1.45 per cent to Tw$136.0 while Hon Hai Precision Industry was 0.44 per cent lower at Tw$89.6.